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This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.
Quae diligentissime contra Aristonem dicuntur a Chryippo. Esse enim quam vellet iniquus iustus poterat inpune. Hinc ceteri particulas arripere conati suam quisque videro voluit afferre sententiam. Bonum negas esse divitias, praeposìtum esse dicis? Sedulo, inquam, faciam. Si de re disceptari oportet, nulla mihi tecum, Cato, potest esse dissensio. Piso, familiaris noster, et alia multa et hoc loco Stoicos irridebat: Quid enim? Ut in geometria, prima si dederis, danda sunt omnia. Eiuro, inquit adridens, iniquum, hac quidem de re;
Bonum integritas corporis: misera debilitas. -, sed ut hoc iudicaremus, non esse in iis partem maximam positam beate aut secus vivendi. Quis enim redargueret? Quae quo sunt excelsiores, eo dant clariora indicia naturae.
- Ask, ‘does this cost have an impact on what will happen in the future?’
Identify Sunk Co ... Lorem ipsum dolor sit amet, consectetur adipiscing elit. Maximus dolor, inquit, brevis est. Quia nec honesto quic quam honestius nec turpi turpius. Quamquam id quidem, infinitum est in hac urbe; Omnia contraria, quos etiam insanos esse vultis. Qui autem de summo bono dissentit de tota philosophiae ratione dissentit. Experiamur igitur, inquit, etsi habet haec Stoicorum ratio difficilius quiddam et obscurius. Duo Reges: constructio interrete. Virtutis, magnitudinis animi, patientiae, fortitudinis fomentis dolor mitigari solet. Sed eum qui audiebant, quoad poterant, defendebant sententiam suam. Quid ergo attinet dicere: Nihil haberem, quod reprehenderem, si finitas cupiditates haberent? Cur igitur, inquam, res tam dissimiles eodem nomine appellas? Quid de Platone aut de Democrito loquar? Tibi hoc incredibile, quod beatissimum. Longum est enim ad omnia respondere, quae a te dicta sunt. Sed tamen intellego quid velit. Hic nihil fuit, quod quaereremus. Hoc sic expositum dissimile est superiori. Quae quo sunt excelsiores, eo dant clariora indicia naturae. Ratio quidem vestra sic cogit. Si de re disceptari oportet, nulla mihi tecum, Cato, potest esse dissensio. De vacuitate doloris eadem sententia erit. Eorum enim est haec querela, qui sibi cari sunt seseque diligunt.
Identifying a Sunk Cost can be difficult when there is no precise way of comparing a loss to a gain. The desire to not appear wasteful also can limit your ability to base a decision on relevant costs exclusively, especially when you feel personally responsible for the investments representing sunk costs.
The Concorde Fallacy.
The Concorde Fallacy is an alternative name for the sunk cost fallacy, coming from the way the British and French governments continued to co-fund the development of the expensive Concorde supersonic aeroplane even after it became financially untenable. Their previous investment, financially and politically, was thought to determine the ongoing funding.
Eat too much?
A common example of the sunk cost fallacy is when someone buys a large meal, then overeats to ensure ‘they get their money worth’.
The sunk cost fallacy is an unconscious bias that arises from accounting and financial domains. It is an important consideration in decision making.
Use the following examples of connected and complementary models to weave the sunk cost fallacy into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Cost-benefit analysis: to consider actual pros and cons of a choice
- Opportunity cost: to consider the potential loss of a future facing decision.
Complementary models:
- First principle thinking: in breaking down a situation to its basics.
- Inversion: considering the opposite, e.g. ‘how can we continue to make that loss again?’
- The Lindy effect: to challenge sunk costs and seeing past longevity as a potential positive.
- Availability heuristic: being overly impacted by immediate situations and losses.
- Lock-in effect: is there greater friction to breaking from the status quo.
Read N. Gregory Mankiw’s Principles of economics for information on various economic theories that involve the concept of sunk costs.
This brief article references some of the relevant studies arising from Behaviorual Economics and the Sunk Cost fallacy. Check this video resource for a quick overview of the sunk cost concept and how it applies to the Concorde supersonic plane case.
My Notes
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